Govt urged to speed up corporate restructuring

JAKARTA (JP): Former International Monetary Fund (IMF) Asia Pacific director Hubert Neiss urged Indonesia to speed up its key corporate restructuring and legal reform programs in order to recover the economy and catch up with other crisis-hit nations in the region.

Neiss said on Wednesday that the restructuring of the country's huge corporate debt had been slow due to the lack of "credible threat" to force debtors and creditors to come to a speedy restructuring agreement.

He said that the commercial court should have played an important role in the debt restructuring efforts.

"But without legal reforms, the bankruptcy court will not work as expected," Neiss told The Jakarta Post in an interview.

"And because there is no credible threat, creditors and debtors are not really pressed to come to an agreement, which means the debt overhang is prolonged," he said.

"This will hamper capital inflow and full economic recovery," he added.

Neiss had been actively involved in designing Indonesia's economic reform programs since the country officially became a patient of the IMF in November 1997 following the outbreak of the regional crisis in the middle of that year.

After more than 32 years working with the IMF, Neiss resigned last month and was immediately appointed as Asia chairman of Deutsche Bank AG.

"I'm still active in keeping track of developments in the region," said Neiss, who met with President Abdurrahman Wahid on Wednesday and Coordinating Minister for the Economy, Finance and Industry Kwik Kian Gie on Tuesday.

The Indonesian corporate sector has some US$70 billion in overseas debts plus about Rp 300 trillion in domestic debts.

The government, through the Jakarta Initiative Task Force (JITF), is planning to provide incentives, including tax breaks, to encourage debtors and creditors to immediately reach restructuring agreements.

But at the same time, the government is also taking measures to bring recalcitrant debtors who fail to negotiate in good faith to the commercial court for bankruptcy suits.

On the outlook for the economy, Neiss said that the forecast had become "somewhat brighter."

"The Indonesian economy is recovering, while at the same time stability and strong balance of payments are maintained," he said.

"Indonesia is moving together with the whole region to recover, but Indonesia is a little bit behind because the reform programs have not been progressing as much as in other countries."

Neiss forecast Indonesia's gross domestic product (GDP) to grow by about 5 percent in 2000, higher than the government's GDP forecast of between 3 percent and 4 percent.

"I think the government is more cautious," he said.

Asked about the direction of the exchange rate of the rupiah against the U.S. dollar, Neiss said the local unit should strengthen and return to the government's assumption of Rp 7,000 per U.S. dollar if the country was consistent in implementing the key economic measures.

"It depends on how economic policy making proceeds and how market confidence develops," he said.

The rupiah was recently hit by concern over the domestic political situation following the dismissal of two key economic ministers, Laksamana Sukardi of the large Indonesian Democratic Party of Struggle (PDI Perjuangan) and Jusuf Kalla of the Golkar Party.

The currency closed higher on Wednesday at Rp 7,970 per dollar on profit taking after recent falls, dealers said.

Asked about the performance of the current economic team as compared to those under the previous administrations of B.J. Habibie and Soeharto, he said: "You can't really make a comparison, because under Habibie there was only a single dominant political party which was really in charge while now it's a coalition government plus a more active House of Representatives."

He said that under present conditions, it was logical that the decision-making process would be more difficult as it required a consensus.

Nevertheless, Neiss said this should not be a problem to the speeding up of the economic recovery as long as the government showed consistency in pressing ahead with its economic reform programs.

"If the reform programs are not pushed forward then this would erode confidence which sooner or latter would slow down recovery," he said.

On the delay of the fuel price hike, Neiss said: "It's a decision which has been taken by the government. I don't see any problem."

He pointed out that the hike in international oil prices had enabled the state budget to continue funding the fuel subsidies but stressed that this could not last forever.

The government was supposed to raise fuel prices by an average 12 percent starting in early April, but decided to postpone it.

Minister of Mines and Energy Susilo Bambang Yudhoyono said on Tuesday that the delay was for an indefinite period.

Asked to comment on this, Neiss said: "Maybe the government does have (a timetable for the fuel price hike). Maybe they just haven't announced it." (rei)